Shoring up pandemic resilience in emerging economies through frugal innovations
The shiny fiscal maths in emerging economies have long relied upon their ability to steer brisk growth rates aided by a staggering export potential, attractive returns on big ticket foreign investments, production incentivization and most importantly, an alluring labour arbitrage.
Notwithstanding the underlying fault lines corresponding to policy myopia, fledgling infrastructure, stretched debt servicing capabilities, widening trade deficits, deteriorating standards of living and volatile socio-political overtures, investors have routinely flocked to park their surplus capital in glistening baskets of high alpha high beta stocks dotting the financial markets in these regions.
The flight of the emerging markets
Led by BRICS, the emerging economies / markets or the so-called growth markets, have ended up sketching a familiar template in their evolution. Many of them, in stark contrast to the laissez-faire doctrines reminiscent of the industrialized regions, had started out with overt protectionism, strict regulations, trade barriers, tariff bubbles before loosening up with varied degrees of liberalization measures. With foreign investments pouring in, their ascent up the wealth chart had been aptly characterized by a marked increase in real disposable income, high household savings, engineered depreciation of currencies (or as economists put it — competitive devaluation) and growing consumption amidst a rising appetite for capitalism. Emerging markets have breached the 7% growth barrier in the previous decades with amazing regularity in individual capacities (China, India), if not collectively.
On the flip side, most of these countries had seen acute poverty saddled with social unrest spread over generations for vast swathes of their populations. Being mute witnesses to a highly skewed distribution of capital, resources and political highhandedness, surviving the vagaries of time, let alone aspire for the goodness of life, had remained a pipe dream for the populace at the bottom of the pyramid.
The globalization saga had a momentous role in dissolving knowledge boundaries and harnessing socio-cultural exchanges beyond borders. The long arm of technology ushered in innovations pertaining to digital, data and accessibility. The proliferation of internet backed by rising digital penetration, be it mobile or social media and decreasing cost of data empowered access to exclusive information for the grassroot levels, even if it was arbitrary. All it needed for fertile minds was an autonomous push to diligently capture volumes of information freely available and eradicate the gaps that differentiated the privileged from the downtrodden, for centuries. A level playing field had been created for individuals to rise up and innovate, irrespective of their regional and economic affiliations.
Many trillion-dollar dreams had been cut short by Covid-19 as the world hunkered down unable to take the impact head-on early this year. With economies getting skittled out albeit temporarily, the developed ones took the harshest beating despite their much-fancied public infrastructure, surveillance mechanisms and wherewithal. US topped the domino pack with much of West Europe following suit, surrendering to a wave of callousness, political rigmarole and panic.
The relegated economies of South Asia, Latin America and Africa too bore the brunt of the pandemic, but with a decidedly tenacious approach many of them have stood up to the virus with conviction. Through inherited genes fortified with resilience, character and toughness from a generation that was exposed to the fallacies of inequality, discrimination and domination, many people have gone on to build solutions to support families, communities and societies. They owe it to the democratization of digital avenues and data platforms that is one of the celebrated by-products of globalization.
Frugal Innovations holding sway over geopolitics
Frugal innovations generally thrive with a heightened sense of déjà vu, in that, they are engineered from the unfulfilled desires of an underwhelmed generation that has seen poverty at extremely close quarters and takes a rapid yet thrifty shot at overcoming this. While not endowed with the luxuries of instant capital infusion or access to hotshot R&D, many times, the solutions are built with extremely limited means, readily available skills and highly compromised perspectives.
Restricted access to cheap and secure credit has been a longstanding issue in many low and middle income economies due to asymmetries in the local financial system. The banking system places a premium on attractive loans through a mix of tedious documentation and strict assessment of repayment capacity. Taking loans through the primitive channels (via unscrupulous moneylenders) is a risky bet and frequently, exposes the vulnerable to the whims and fancies of moneylenders, often with tragic consequences. This situation particularly places the bottom of the pyramid at the receiving end of their financial rights. Though microfinance institutions in many countries have attained maturity, they still lack the “big-ticket” ambitions to incubate large scale innovations at a holistic level, unlike the big city capital houses, which, in many ways, are connected more closely with the global system. So comes a knack for the quick “out-of-the-box” thinking which in fact is a genetic embellishment for most of the population to bolster means of survivability, passed down the ages.
The fact that Covid-19 has put the brakes on the free flow of materials and workforce beyond borders, be it regional or international, would be a gross understatement. The prevailing supply chains, distribution and logistics networks have seen a grinding down impacted by government mandates to contain the pandemic. This resulted in vital disruptions to regular amenities such as healthcare, social infrastructure, agriculture, small scale businesses in addition to large scale institutional activities such as manufacturing and industrial production.
Covid-19 has spawned inspiring tales of frugal innovation characterized by an indomitable spirit and resilience. It is not that they did not exist before, it is the gravitas of these instances, in light of Covid-19, that has made them curious cases for magnified investigation.
Africa rising to the occasion
Remittances have been instrumental in replenishing low- and middle-income economies as exodus to greener pastures for financial stability to support families back home have continued as a tradition.
Remittances have been a major casualty of Covid-19 as uncertainty of unemployment abroad have wreaked havoc on local economies in Africa. Data from World bank suggests that in 2019 remittances having grown by 3.5% to a value of $70.7bn, constituted up to 2.5% of the region’s GDP on an average, going up to 10% for smaller countries such as Senegal. In 2020, the decline was the steepest in Sub-Saharan Africa (-9%) followed by North Africa (-8%) while 2021 is not going to be any better (-8% and -6% respectively).
A major pain-point plaguing remittances has been the prevalence of high cost of transfers. According to World Bank, the global average cost of sending $200 was 6.8% in the Q3 2020, which is more than double the Sustainable Development Goal target of 3% by 2030. Sub-Saharan Africa topped the chart with the highest cost at 8.5%. Among the various channels, banks charge the most (10.9%), followed by post offices (8.6%), money transfer operators (5.8%) and mobile operators (2.8%).
The business model of money transfers in many cases remained wrapped in illicit methods such as “change of hands” before stringent regulations intervened. The high cost of transfers in many cases, most prominently in Sub-Saharan African economies are now due to extra KYC requirements for operators. Money transfer and mobile operators have to comply with Anti-Money Laundering (AML) and Combating Terrorism Financing (CFT) rules set forth by banks, which have been pushing the cost upwards, as manual systems of identity verification cost both money and time. Cost-effective technology partnerships and innovative digital identity verification systems can pave the way for lower transaction costs benefitting the senders and recipients. Nigeria for example, has seen innovations by digital remittance providers such as TransferWise and Azimo who are pushing the cost of transfers down, through optimized use of local technology partnerships. Azimo created an instant money transfer solution through a direct API connection to Interswitch that operates a real-time infrastructure switching facility to all banks in Nigeria, making the process highly cost effective. Also, Nigeria has been experiencing a growing level of digital penetration, making the market competitive for the entry of digital remittance providers. As a result, the costs are lower as compared to the neighbouring countries. In fact, Azimo and TransferWise claim to have reduced the cost of transferring £120 ($149) from the UK to Nigeria, by as much as 4%-5%, which is within a striking distance of the UN’s 2030 SDG target of 3%.
Elsewhere in mainland Africa, social entrepreneurship at grassroot levels has fostered production and distribution of hand sanitizers, soaps, face masks with locally available, reusable resources.
The likes of solar powered wash basins and thermal sensors in Tanzania and Uganda, community mobilization by Safe Hands Kenya to build robust digital distribution channels, promotion of a locally developed compact and economical ventilator named Pumualshi 2.0 that can be used by generic medical staff are good examples of repurposed innovations in the social and healthcare space.
Other interesting usecases include the development of Covid-19 rapid test kits by medical universities in Kenya and Uganda, design of a digital triage tool, deployment of whatsapp based chatbots for public awareness, mobile apps to bridge fruit and vegetable sellers with customers in Uganda, digital learning initiatives through mobile apps such as Kisomo SmartLearn in Tanzania and SAIDE community library in Kenya, web-based X-ray lung scans to diagnose Covid-19 patients in Tunisia. The Tunisian police have deployed locally developed robots called PGuards patrolling the streets in Tunis and assisting them in combing / surveillance operations for Covid containment. Offenders if detained by these robots are asked to produce their IDs which are validated by the head mounted cameras backed by thermal imaging and light detection technologies.
The Latin American community conviction
In Latin America, Mexico had taken the lead to provide a comprehensive digitization avenue for its SME segments. Also, on the anvil is the Concuzo Mi Consumo (I know my consumption) digital inclusion initiative, where an innovative digital tool empowers the consumers of telecom providers to find and autonomously select the best plan based on their appetite and capacity. A local IT firm Seguritech has developed a mobile app to help the emergency service call centre undertake video diagnosis of Covid-19 prospects and connect them to the medical community.
In Brazil, a local peer-to-peer (P2P) lender IOUU launched a campaign on its platform to support the impoverished small businesses with favourable rates and funding sources. It also served as a hub for these businesses to complete customer transactions with a view towards uplifting local consumption and ailing industries. A social impact start-up Dr Consulta which originally offered high quality and affordable healthcare to low-income clusters took on the telemedicine route this year to be more effective. The public sector too, came forward to reinvigorate the Bolsa Familia (a social protection network working for the bottom of the pyramid), protect jobs through relaxed labour laws and chip in with emergency aid to the vulnerable population, especially the informal workforce.
Peru reeling under a strict lockdown, had initiated a contactless digital logistics programme to help the seamless movement of goods across the airports, ports and land borders. Also, APROPO a humanitarian agency had facilitated a digital suite of health advisory consisting Facebook Messenger, Whatsapp, its own chat site Sexo Seguro, a chatbot enabled phone line to respond to women and provide them with expert guidance on personal health decisions.
Colombia had deployed Rappi robots to navigate the streets in the city of Medellin as part of grocery and hotel takeaways.
South Asia raising the bar for innovations
In South Asia, India and Malaysia have seen instances of innovative platforms floated to bail out crisis-ridden SME and micro SMEs. In rural India, bereft of any significant government backing during the long drawn lockdown, when digitally illiterate SMEs were struggling for survival, fintechs like Dukaan, Khatabook, Bikayi came up with the digital storefront concept to provide a window of existence, helping them to establish an online presence. In Malaysia, there is a scheme to onboard SMEs and micro SMEs onto the digital space, offering support, subsidies and training.
In Vietnam, students and faculty of Danang University had collaborated to develop a low-cost automatic hand sanitizer dispenser to support the overstretched local healthcare system.
Thailand had seen a spate of local innovations fuelled by the desire to collectively fight the pandemic. The local tech ecosystem had a major role in tapping the unsung powers of digital to create purposeful and high impact solutions. Be it the development of a Covid tracker (an interactive map of Thailand) offering real time insights on active cases tied to their true reported sources, which also doubled up as a tool to counter fake news or the “Chula Care” app from the Chulalongkorn Hospital facilitating the necessary patient-doctor interactions such as appointments, fee payments, guidance. WIN-Masks (Washable Innovative Nano-Masks) are a wonderful derivative of the government and institutional partnership (ministries, hospitals, research centres). The Clicknic app allows for video consultation with doctors once users start putting together a list of symptoms and facilitates home delivery of prescribed medicines. Robot helpers developed by Chulalongkorn and Thammsat universities have come to the support of medical logistics by ferrying essential medical equipment and medications around the hospital premises.
The maverick population of India swears by Jugaad (a colloquial term for frugal innovation) which serves as a basic component of their hinterland upbringing. More often than not, it is the dystopian setting that has pushed people to gather their wits and offer ingenuity to get over shocking experiences. So, innovations at all levels have followed, such as the commoditized development of sanitizers and masks through the augmentation of the rural industry, deployment of a plethora of covid diagnosis, tracking and doctor consultation apps, mass market production of low-cost ventilators through a triple-helix model of innovation (universities, start-ups and government), drones to assess social distancing rules, online hackathons to develop non-medical solutions, robotized logistics and transport mechanisms, platforms and apps to take online education to the rural mass.
Learnings for the post-covid timeline
At a broader level, all these frugal innovations have typically seen multiple end states, based on the level of ingenuity, scale of production and adoption and performance. Many of these have failed to go beyond the grassroot levels, after satiating the appetite of the local communities, either due to lack of marketing / incubation opportunities or the paucity of funds to develop “at-scale” models. Quite a few have managed to grab the right eyeballs, either through “serendipity” or concerted pushing on social media platforms by evangelists. A few have even managed to be deployed globally as potential game-changers for the industry.
But one aspect is very clear. Any catastrophe is bound to bring out the triad of “Character-Spirit-Resilience” traits in humans, if only the world realizes that the right to resources and equanimous development is not confined to the so-called economically glamorous clusters, but serves as a universal endowment.
The world will not breathe in the same way in a hopefully pragmatic post-Covid environment. It’s frugality in desires and greed that will be needed to uplift the “whole of us” in a sustainable way with innovation taking precedence.
